Political determination by the government in pushing through key economic bills in the resumed parliament session from Monday can boost the subdued Indian equities markets, which have been disappointed over the poor quarterly earnings of India Inc.
Market experts point out that government-backed measures such as movement on new reforms, execution of past policy announcements, enhanced infrastructure funding and signs of more disinvestment have the ability to lift the markets.
“The government’s ability to pass key bills in parliament will show a strong political determination for economic revival. This will be the confidence booster the markets are looking for,” said Dipen Shah, head of private client group research at Kotak Securities.
“The government’s plans on the GST (goods and service tax), the land bill, the anti-black money bill and other reforms programmes in the parliament session will be keenly observed by the investors,” Shah told.
The government expected to aggressively push key pending bills like the ones on the now re-promulgated land ordinance and on black money stashed away abroad, when the budget session resumes.
However, international events like the outcome of Greek debt crises, Middle East unrest and rising oil prices have got the potential to upset the markets, said Devendra Nevgi, chief executive of ZyFin Advisors.
“The Greek debt crises, China’s slowing economy, Middle East unrest and rising oil prices have all got the potential to dampen the Indian markets. However, a strong showing by the government in passage of key bills through the Rajya Sabha will be a positive outcome for the markets,” Nevgi said.
According to Nevgi, the Indian markets are in a situation where corporate earnings need to catch up with the expectations of the investors.
“The expensive Indian equities markets are still attractive option for investors due to hopes of a rate cut, which will fuel consumer confidence. However, fresh investments in the market would only take place depending on the outlook that the companies give in their fourth quarter results,” Nevgi added.
The investors during last week’s trade showed that mere endorsement of economic growth potential by international financial institutions is not enough for them and that corporate India’s earnings have to catch-up with the high expectations.
The market dampener came even though India’s economic growth potential was endorsed by the likes of the World Bank, IMF, Asian Development Bank, Organisation for Economic Co-operation and Development (OECD), Moody’s and the Economist Intelligence Unit.
The benchmark 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) lost 457.28 points or 1.58 percent during the weekly trade session ended April 17.
Experts added that markets will also look forward to the apex bank on any signs of future rate cuts as major inflation indicators have come in line with expectations and that banks have started to lower lending rates.
“As a positive trend, banks have lowered lending rates, though by a small proportion of only 25 basis points,” Vinod Nair, head-fundamental research, Geojit BNP Paribas Financial Services, told.
The March CPI (consumer price index) inflation came to 5.17 percent, lower than the 5.37 percent for February. A decline was also observed in the wholesale price index (WPI), which fell by (-) 2.33 percent (March 2015 over March 2014) from (-) 2.06 percent for the previous month.
“This data will be looked at to identify the inflation trend as statedd by the RBI. Hence, the next rate cut decision will depend to combined action by the RBI, banks and the government, which will have to deal with the high non-performing assest (NPAs) of the banks,” Nair added. (IANS)